Assume the following financial data: Short-term assets $200,000 Long-term assets
ID: 2734137 • Letter: A
Question
Assume the following financial data:
Short-term assets $200,000
Long-term assets 350,000
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Total assets $550,000
Short-term debt $100,000
Long-term debt 50,000
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Total liabilities $150,000
Common stock $150,000
Retained earnings 250,000
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Total liabilities and stock holders' equity $550,000
Total earnings (after-tax) $48,000
Dividends per share $1.10
Stock price $54
Shares outstanding 16,000
a. Compute the P/E ratio (stock price to earnings per share)
b. Compute the ratio of stock price to book value per share. (note that book value equals stockholders' equity)
c. Compute the dividend yield
d. Compute the payout ratio
Explanation / Answer
All Amounts in $ a. P/E Ratio = Price per share / Earning per share Earning per share = $ 48,000 / 16,000 = $ 3 per share Hence, P/E Ratio = $ 54 / $ 3 = 18 : 1 b. Stock Price per share to book value per share = Market Price / Book Value Book Value per share = $ 150,000 / 16,000 = $ 9.375 per share Hence, Stock Price to Book Value per share = $ 54 / $ 9.375 = 5.76 : 1 c. Dividend Yield = Dividend Per Share / Market Price per Share = $ 1.10 / $ 54 = 2.04% d. Dividend Payout Ratio = Dividend Per Share / Earnings per Share = $ 1.10 / $ 3 = 36.67%
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